The positive momentum that started at the end of 2010 in Orange County’s retail market has continued in 2011, with improvements in the national economy spurring increases in consumer spending so far.
The most recent data available on national retail sales show a 1% increase in February over the prior month and a 9% gain compared to a year earlier, according to the U.S. Commerce Department.
The healthy increase in retail sales has helped the market for retail space in the county.
The first quarter saw the overall vacancy rate for OC’s retail segment drop to 3.4% from 3.6% the prior quarter.
Losing Streak Over
The segment accounted for 154,589 square feet of positive net absorption in the first quarter, its first period on the plus side since the second half of 2009.
The activity has led to a slower pace of cuts to rents. The average asking lease rate for retail space here fell to $2.44 per square foot. That’s six cents below the prior quarter and a nine-cent cut from a year ago.
The Central Coast submarket has the lowest vacancy rate at 2.5%.
North Orange County also is better than average at 3.2%.
Central Orange County’s vacancy rate is at 3.6% and West Orange County is slightly better with 3.5%.
South Orange County’s vacancy rate of 4% is the highest among the submarkets, mainly due to an 8.5% vacancy level at strip malls.
The bulk of the quarter’s positive absorption was seen in the West County submarket which recorded 91,087 square feet.
South County saw 53,605 in positive absorption.
Central Coast accounted for 24,024 square feet on the plus side.
North County was nearly flat with 7,647 square feet absorbed.
Central County had 21,774 square feet of negative net absorption.
No New Projects
Construction of large retail centers here remains on hold.
No large projects have started since the end of 2008.
Construction of smaller retail projects remains minimal, with a few that are less than 50,000 square feet ongoing.
The improved outlook on retail appears to be on the verge of establishing momentum, but progress has been tempered lately by hefty increases in gasoline prices, rising inflation and continued challenges in the housing market.
Analysis provided by CB Richard Ellis Research.